Trader’s Narrative

At the end of June I wrote about Crocs (CROX) and Heelys (HLYS), two faddish shoe companies that I didn’t think had any longevity.

Back then Crocs’ shares were in the low $40’s and Heelys were in the mid $20’s (red arrows below). Heelys’ chart looked much worse as it was in a clear downtrend and had just fallen through intermediate support. Not surprisingly it fared worst among the two. Today it closed at $6.19 a share.

Crocs fared better as it rose to a high of $75 but since then it has fallen to the high $30’s. The damage is in the broken uptrend:

Even Maddox got in on the action and landed a few punches. As you’d expect, insiders have been selling like crazy. The insider selling wasn’t a tipoff since anytime you have a huge runup, insiders can’t resist taking free money. The actual tipoff was that the product is a fad and offers no real benefits which competitors can not emulate at a much cheaper price.

Remember “Ginger”? aka Segway? The invention that would give all other inventions an inferiority complex? The invention that would have whole cities ripping out their roads and redesigning themselves around it? Yeah, that one. Whatever happened to all the hype?

Since it’s unveiling in 2002, I’ve only seen two being used in real life. And in both instances, the owners were not using it for its utilitarian purpose but to show off a $5000 glorified scooter.

Now there are some rumblings of an IPO being on the horizon. I guess the early VC investors want out since it is obvious that the project will not generate any cashflow. Might as well offload the thing to the gullible public, right?

The problem, as I see it, is not really with the management of the company or the marketing of the product. Evenso, you have to wonder just how clueless they are when they have only recently made plans to offer leases as a way to mollify the sticker shock. The real problem is that it is ergonomically wrong for a device to make you stand erect, while moving you horizontally.

The human body wasn’t designed for that. In fact, we need to be in constant motion. It doesn’t help either that the Segway offers no real shock absorbers; causing any bump or vibration to travel right up your spine. In the end, the Segway will be a footnote in history. Look for it right beside the citation for the Apple Newton.

And here is Maddox adding insult to injury: